Burkina Faso - Economic Recovery Credit (ERC)

Report No. PIC573 Project Name Burkina Faso-Economic Recovery Credit (ERC) Region Africa Sector Non-sectoral Project ID BFPA35593 Borrower Government of Burkina Faso Implementing Agency Ministry of Economy, Finance and Planning Ouagadougou Burkina Faso Contact: Mr. Joseph Bissiri Sirima Executive Secretary, SAP Ministry of Economy, Finance and Planning Date Prepared March 10, 1994 Appraisal Date February, 1994 Board Date March 29, 1994 Credit Objectives The ERC seeks to assist the Government of Burkina Faso deepen its adjustment strategy, to ensure that gains in competitiveness are consolidated, the adverse effects of the devaluation on vulnerable groups are minimized, and a Priority Action Plan in Primary Education and Health is implemented to accelerate human resource development and alleviate poverty. Credit Description The African members of the Franc zone decided to devalue their currency, the CFA franc, effective January 12, 1994. The proposed credit would support the post-devaluation reform program for 1994 as outlined in the Government's Statement of Economic and Social Development Policies dated March 7, 1994, whose main objectives are private sector led growth and the alleviation of poverty. The Burkinabj Government has already taken a series of key macroeconomic and structural measures including: (i) the devaluation of the CFA franc from 50 CFAF to 100 CFAF/1FF; (ii) an increase in the producer price of prime quality cotton by 40w; (iii) a program of social measures to mitigate the effects of the devaluation on vulnerable groups; (iv) prudent demand management policies to reduce public sector absorption and limit public wage increases; (v) increase in social sector expenditures in real terms; (vi) recruitment of 300 additional teachers to open closed classrooms; and (vii) establishment of a price list of essential generic drugs. In addition, the ERC supports priority actions in primary education and health, including implementation of training for wider use of essential generic drugs and cost recovery in health centers (with the assistance of UNICEF) as well as recruitment of 1,100 additional primary school teachers at the start of the 1994/1995 school year.  Implementation arrangements (Procurement and disbursement) The proposed credit amount is SDR18.0 million (US$ million equivalent). Due to the urgent nature of the operation the entire credit is proposed for disbursement in a single tranche shortly after effectiveness. Proceeds of the credit would reimburse 1009 of the foreign exchange costs of eligible imports, of public or private sector origin, except for negative list and imported goods already funded under bilateral or multilateral credits. The proposed date of eligibility would be set in light of the Government's preparation of a deepened austerity program in August 1993. In order to permit timely disbursements in the amounts needed to keep to program targets, the full amount of the credit would be eligible for retroactive financing. August 2, 1993, is proposed as the cut-off date for retroactive financing. Environmental Category The Project would be consistent with IDA policy and would follow acceptable IDA procedures. In conformity with IDA policies for adjustment operations, no environmental rating has been assigned. The reduction of tariff rates of fertilizer imports is expected to have a positive effect on the quality of soil resources, and the reduction of taxation of kerosene should contribute to slowing of the rate of deforestation. Contact Point: Public Information Center The World Bank 1818 H Street, N.W. Washington, D.C. 20433 Telephone: (202)458-5454 Fax No.: (202)522-1500 Note: This is information based on an evolving project. Certain components may not necessarily be included in the final project. - 2 -